How long before GM declares bankruptcy?

Yesterday, GM announced that it was going to stop making matching contributions to salaried employees' retirement accounts. It simultaneously dropped a requirement that a portion of these accounts be invested in GM stock. Union contracts prevent it from doing anything with hourly employees' wages or benefits, but retirement obligations are a huge liability to the company, just as they were a factor in the collapse of the US steel industry.

This follows an announcement not long ago that they would be letting go 30,000 employees and closing several plants in states like Michigan, Ontario, and California. The company has a glut of vehicles, mostly SUV's, that it overproduced in 2005 and has had to slash pics to move. Their largest supplier, Delphi, is already in bankruptcy. GM's credit has been lowered to junk status.

I forsee the fed govt. bailing them out before that happens. Like they did Chrysler in the 80's (strategic industry necessary for national defense yada yada)

People will miss that it once meant something to be Southern or Midwestern. It doesn't mean much now, except for the climate. The question, “Where are you from?” doesn't lead to anything odd or interesting. They live somewhere near a Gap store, and what else do you need to know? - Garrison Keillor

Not gonna happen

A government bailout is more likely than bankruptcy. With that said, neither is going to happen. GM will fall from #1, but that writing has been on the wall for awhile. Things will get even tougher for people with ties to GM, but the company itself will survive.

A government bailout is more likely than bankruptcy. With that said, neither is going to happen. GM will fall from #1, but that writing has been on the wall for awhile. Things will get even tougher for people with ties to GM, but the company itself will survive.

Folks from Michigan understand better than most just how much political influence the auto industry wields. Why else would we have no public transportation in the state?

People will miss that it once meant something to be Southern or Midwestern. It doesn't mean much now, except for the climate. The question, “Where are you from?” doesn't lead to anything odd or interesting. They live somewhere near a Gap store, and what else do you need to know? - Garrison Keillor

Yesterday, GM announced that it was going to stop making matching contributions to salaried employees' retirement accounts. It simultaneously dropped a requirement that a portion of these accounts be invested in GM stock. Union contracts prevent it from doing anything with hourly employees' wages or benefits, but retirement obligations are a huge liability to the company, just as they were a factor in the collapse of the US steel industry.

How long before GM goes under?

Meanwhile C. Richard Wagoner, Jr., CEO of GM takes home 33 million in pay over the last three years. Maybe the executives could make little but less, put some money into R&D to make reliable/safe cars that the general public in the U.S. will buy, or possibly not mess with employee pensions, etc. than we wouldn't have these issues crop up.

"But what about those greedy unions, ZMan."
Funny you should ask. Possibly, if ownership/managment wasn't so greedy, we wouldn't need the unions to ensure fair treatment of employees. Someone on here said that Toyota's US assembly plants are happily non-union, I wonder what the average pay/benefits they enjoy without UAW backup.

Retirement options a HUGE LIABILITY?!
High executive salaries are any even bigger liability in this planner's opinion...

I hope GM doesn't go under, but I feel sorry for the 30,000 who are getting laid off because some people cannot take a pay cut. Greed kills.

Last edited by zman; 16 Dec 2005 at 12:16 PM.

You get all squeezed up inside/Like the days were carved in stone/You get all wired up inside/And it's bad to be alone

You can go out, you can take a ride/And when you get out on your own/You get all smoothed out inside/And it's good to be alone
-Peart

I'm not well versed in bankruptcy law, but can't you declare bankruptcy without going out of business. Isn't this what K-mart and United Airlines have done?

Yes, both corporations and individuals can declare bankrupcy either as a way to reorganize under court protection, or as relief from creditors. All four types of bankrupcy have their own chapter in the laws but I can't remember for sure what they are (13 and 14 for individuals and 11 and 12 for corporations, I believe, with the lower of the two numbers being for reorganization).

I think GM is in a state, but to a large part it (and most other companies with large retirement liability) have done it to themselves. Most of the pension plans were devised as "pay as you go" systems in the 1950s-70s when employment was much more stable. You work for the company and pay into the pension to cover the guys who've already retired. But in the 1980s, companies began to go through drastic payroll reductions through a variety of scams (outsourcing and offshoring, contractors and temp workers, early retirements to bring in younger and cheaper labor, etc). The result was a shrinking pool of full, salaried employees supporting a pool of retirees that isn't going to shrink in the near future. To make matters worse, whenever a pension plan was "overfunded," the corporate boards found some excuse to suck money out of it. The result is that now the corporations have huge outstanding retirement liability in underfunded pensions and the only (easy) choice left being to remiss of their obligations to their retired employees.

I picked sometime in 2006 since the other options are 2005, and well, 2005 is almost over.

I think that it will happen, and they will reorganize and sell off the auto divisions to foreign auto makers similar to what Chrysler did in their union. General Motors as it is will change their name can continue with business because they have their hand in everything from TV's to footballs.

The overall cooperation is too big and to diversified to fail at this point. The auto division is doomed though.

"A long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defense of custom. Time makes more converts than reason." - Thomas Paine Common Sense.

Meanwhile C. Richard Wagoner, Jr., CEO of GM takes home 33 million in pay over the last three years. Maybe the executives could make little but less, put some money into R&D to make reliable/safe cars that the general public in the U.S. will buy, or possibly not mess with employee pensions, etc. than we wouldn't have these issues crop up.

"But what about those greedy unions, ZMan."
Funny you should ask. Possibly, if ownership/managment wasn't so greedy, we wouldn't need the unions to ensure fair treatment of employees. Someone on here said that Toyota's US assembly plants are happily non-union, I wonder what the average pay/benefits they enjoy without UAW backup.

Retirement options a HUGE LIABILITY. High executive salaries are any even bigger liability in this planner's opinion...

I hope GM doesn't go under, but I feel sorry for the 30,000 who are getting laid off because some people cannot take a pay cut. Greed kills.

I completely agree with your entire post. Instead, they try to trim the fat by cutting wages of those on the line because "they make too much money".

I have always said this. I remember when United Airlines (big employer in the Denver area) was going through their bankruptcy, with managment forcing pilot and mechanic paycuts "for the good of the company" and that got me thinking....

You get all squeezed up inside/Like the days were carved in stone/You get all wired up inside/And it's bad to be alone

You can go out, you can take a ride/And when you get out on your own/You get all smoothed out inside/And it's good to be alone
-Peart

I bet the economic developers of Automation Alley in Oakland County are investing heavily in Jack Daniels these days. Hopefully their vision for Southeast Michigan (metro Detroit) doesn't get flushed away.

“As soon as public service ceases to be the chief business of the citizens, and they would rather serve with their money than with their persons, the State is not far from its fall”
Jean-Jacques Rousseau

I bet the economic developers of Automation Alley in Oakland County are investing heavily in Jack Daniels these days. Hopefully their vision for Southeast Michigan (metro Detroit) doesn't get flushed away.

Automation Alley has a lot more going for it than GM. Southeast Michigan (as whole) has a lot more going for it than GM. It will get worse (probably more worse than we can imagine right now), that region is relatively safe.

maybe not bankrupcty, but definitely reorganization and a drastically smaller company.

what's happening to GM is also, to an extent, happening at Ford. My father-in-law is an engineer with Ford and is probably going to get laid off in January. They have been slashing tons of jobs lately.

Ford and GM are on their last legs (in terms of market share). Their products are all pretty poor and drab.

what's happening to GM is also, to an extent, happening at Ford. My father-in-law is an engineer with Ford and is probably going to get laid off in January. They have been slashing tons of jobs lately.

Meanwhile Bill Ford has taken home 40 million over the past 3 years...
But he sees it fit to ask Congress for corporate tax breaks in order to design and engineer more fuel efficient cars.

Tell ya what, Billy. Take 5 or so million of that and put it into R&D, and take abother 10 or so million and put it towards saving the jobs of your workers. Do you think you could live off of 25 million? Or am I being too harsh.

ZMan's socialist grand standing is done for now. As I think I hear a couple Black Helicopters being dispatched.

You get all squeezed up inside/Like the days were carved in stone/You get all wired up inside/And it's bad to be alone

You can go out, you can take a ride/And when you get out on your own/You get all smoothed out inside/And it's good to be alone
-Peart

The Federal government will offer cheap money to GM to operate their failing business operations before this country addresses a major cause of the problem, health care costs. Car makers in Japan don't have the same overhead due to employee and retiree health care costs that is not financed through the company. Until this issue is addressed, American companies will have a disadvantage in the international market place. On a more positive note, restructuring GM is likely a good idea. They offer few cars that I would even look at once. I can't understand why they still make a corvette, I haven't seen a new one on the street in years, and why don't they make a small SUV any more. Their small cars can't compete against anything built by Japan and now they are having a hard time matching those made by Korea. They seem locked in the past and can't see beyond the next quarterly report. I owned only one GM product. It was a peice of junk and I traded it in after only one year. The local dealership couldn't fix a problem and told me to take it to an independent repair shop.

Meanwhile Bill Ford has taken home 40 million over the past 3 years...
But he sees it fit to ask Congress for corporate tax breaks in order to design and engineer more fuel efficient cars.

Tell ya what, Billy. Take 5 or so million of that and put it into R&D, and take abother 10 or so million and put it towards saving the jobs of your workers. Do you think you could live off of 25 million? Or am I being too harsh.

ZMan's socialist grand standing is done for now. As I think I hear a couple Black Helicopters being dispatched.

While I certainly sympathize with this line of thinking, and have expressed it myself in the past (Onwards! to the Ramparts, Workers of the World!) the reality is that executive compensation is a pretty small percentage. $5 million wouldn't do much at all. The real problem is we don't provide much of a social safety net, a few old-line corporations do/did.

and that is just fine

Originally posted by RichmondJake

Why do I feel so apathetic to this situation? I really don't care.

Maybe because GM is just a company to you. If I looked at it that way (more), I probably wouldn't care (as much) either. But to many people when they think of GM, they think of their Dad, Uncle, or Grand Father or neighbor working there. It's when a face is put to it, that it takes on some meaning. Also if you owned stock, you would probably care.

I don't have any familial ties to GM, but its presence in my 'hood makes me take notice. I can't do anything about it, but I still care.

While I certainly sympathize with this line of thinking, and have expressed it myself in the past (Onwards! to the Ramparts, Workers of the World!) the reality is that executive compensation is a pretty small percentage. $5 million wouldn't do much at all. The real problem is we don't provide much of a social safety net, a few old-line corporations do/did.

I agree. Why not have both?

You get all squeezed up inside/Like the days were carved in stone/You get all wired up inside/And it's bad to be alone

You can go out, you can take a ride/And when you get out on your own/You get all smoothed out inside/And it's good to be alone
-Peart

Being a Metro Detroiter with many family members with auto ties. My employer, a city has +30% vacancies in the light industrial areas; and 15 -20 % vacancies in the office markets. It is real to many of us.

My favourite cars are BMW's and have owned a few of them. I always thought the big three needed a kick in the a** especially in the late 70's and 80's. I am not one who thinks buy American, love it or leave it. In reality cars & all of the many components (almost all in the world) are designed primarily in southeast Michigan. Toyota is building a major new design facility south of Ann Arbor. The list of subcontractors goes on forever. Just in my employer city: Behr, Lear, Siemans,etc. Many of these are major international companies. But there are some major misconceptions regarding the American auto companies.

Yes years ago the quality, fit & finish of European and Japanese cars blew away the USA cars. In fact the quality of all cars today are very good. It is almost meaningless to measure their differences. In fact Honda and Toyota have slipped below some American cars in quality. I have a 1998 Windstar, hate it, ulgly mini-van, but it has 165,000 miles and has not rusted out. In two weeks I'm going to let my 17 year old drive it, when I get my first GM car, since a 1972 Impala or something like that. I get a discount because my brother in law is an OnStar executive. I remember when you barely could get 100,000 mile out of an American car. But, my old BMW's where just gettin broken in at 100,000 miles.

The Cadilac STS is the most technologically advanced car in the world.

We have new businesses located in my employer city, that apply automotive systems, applications and engineering to the medical field.

We have new business located in my city that create alternative power sources for the automotive industry.

My biggest complaint about the USA auto companies is styling and too many brands that are useless. They need to make fun cars to drive. Plus GM doesn't make a good mini van.

Also the unions who were necessary when Henry Ford's goons were throwing assembly line workers off the Rouge River Bridge. But, as a Detroiter everyone has a relative or friend who tells stories about themselves or other people who go to great extremes to not work. It is common for the old timers to punch in and drive home for the night. It's the job of the young punks to punch out the guys who put their time in. Or every hear of sleep nests; hiding places to sleep your shift away.
Or $26 an hour, plus bennies to sweep floors. The unions have put the big three in a tough spot.

I could go on and on.

With that being said, I really want to buy a Subaru, American cars are like vanilla ice cream.